An Advance Fee Loan Scam is essentially a more sophisticated version of the old Nigerian prince e-mail. The goal is to shake down an innocent mark of his or her cash with promises of impossible money that will never come. In this case the lure is made more believable by the fact that no one has promised you outright free money, unlike the shockingly generous Nigerian royalty, only a very favorable loan.

According to the Michigan Attorney General, a fee scam generally targets people who have bad or no credit, offering a loan or card regardless of their credit history and often on surprisingly generous terms. Then the scammers go to work.

"The consumer is soon told, 'You are qualified but you must send a fee to process your application, pay a security deposit, pay for insurance.' The victim pays the money, and no loan or credit card is issued."

This, in a nutshell, is the entire method of a fee scam: they lure the victim in with promises of easy credit, often catching people unable to find help anywhere else. Then the scammers shake the victim down for as many payments as possible. The scammer asks for fees, deposits, up-front-anything for as long as the victim is willing to pay--and of course never actually delivers. Occasionally they get ambitious and ask for a bank account or social security number to try and draw payments directly. Once the victim catches on and stops paying, the scammer moves on to another target.

Protecting yourself from a fee scam is, fortunately, not too complicated. As the Federal Trade Commission points out, "legitimate lenders never 'guarantee' or say that you're likely to get a loan or credit card before you apply, especially if you have bad credit, no credit or a bankruptcy."

It's also illegal for a lender to ever ask for payment before a loan or credit card has been issued. A lender that wants any kind of fee up front is trying to shake you down.